Buoyed by Hollywood and Camera Sales, Sony Doubles Profit

By MARTIN FACKLER

Published: July 27, 2007

Sony said Thursday that its fiscal first-quarter profit doubled as strong digital camera sales and the box-office success of ''Spider-Man 3'' helped offset losses from the PlayStation 3 game console.

Net profit in the three months that ended June 30 was 66.5 billion yen, or $554 million, up 105.9 percent from 32.3 billion yen in the period a year earlier. The gain was in stark contrast to the January-to-March quarter, when Sony reported its worst quarterly loss in four years.

The most recent results are the latest sign that long-struggling Sony is faring better against South Korean and Chinese rivals, which have taken global market share from Japan's once-proud electronics industry with lower-cost products.

The rosy picture was marred by the poor performance of PlayStation 3, a flashy but expensive machine that Sony had been counting on to be a global hit. Sony said the loss at its games division grew to 29.2 billion yen from 26.8 billion yen in the quarter a year earlier.

Sony reported robust sales of its Bravia flat-panel televisions and Cyber-shot cameras, evidence that it was persuading world consumers to pay more for the Sony brand. Over all, revenue rose 13 percent, to 1.98 trillion yen.

Sony also said that it had benefited from a favorable yen exchange rate and the cost-cutting efforts of its first chief executive who is not from Japan, the Welsh-born Howard Stringer.

Since taking over two years ago, Mr. Stringer has eliminated jobs, closed factories and shed unprofitable businesses like a Japanese-based chain of Parisian restaurants.

Mr. Stringer has also pledged to raise Sony's operating profit margin to 5 percent this year, a goal the company reached in the first-quarter results. The target of 5 percent is low by American standards but about par for Japan's less shareholder-friendly corporations. But even reaching that threshold represented a big improvement for Sony, which entered its recent slump four years ago with losses that sent Japan's stock market into a tailspin.

Reviving Sony's electronics division, which accounts for about three-quarters of the company's sales, has been central to Mr. Stringer's turnaround strategy. Sony had been losing ground not only to low-cost Asian competitors but also to nimble rivals like Apple, whose iPod ended Sony's two-decade dominance of portable music players.

Sony's chief financial officer, Nobuyuki Oneda, told reporters Thursday that the company still expected to lose money this year on televisions, a bread-and-butter product for Sony. Sony was late to switch from TV tubes to newer technologies like liquid-crystal displays, falling behind two of its South Korean rivals, Samsung and LG.

Still, Sony said it had managed to pare its losses in televisions while recording strong gains in sales of cameras and camcorders. A weaker yen, which drove down the price of Sony's products in overseas markets, also lifted sales, the company said. Sony said Thursday that quarterly profit at its electronics division jumped 77.3 percent, to 84.1 billion yen.

Sony Ericsson, Sony's cellphone joint venture with Ericsson of Sweden, posted a profit of 220 million euros, or $302 million. Sony's Hollywood studio turned a profit of 3.3 billion yen, improving from a loss last year. Sony credited the popularity of ''Spider-Man 3'' and the latest James Bond film, ''Casino Royale.''

For the current fiscal year, ending March 2008, Sony kept its forecast for net profit unchanged at 320 billion yen.

Analysts said Sony appeared to have misread the direction of the video game market, surrendering an early lead to Nintendo's cheaper and simpler Wii console. The two consoles went on sale late last year, a year after another competitor, Microsoft, introduced its Xbox 360.

Sony invested at least $2 billion to develop the PlayStation 3, loading it with the company's newest technologies, like the Blu-Ray DVD player and the Cell high-speed processor.

The console's price in the United States remains twice as high as Wii's, even after Sony cut it by $100, to $499, earlier this month.

The Nintendo console has also used easy-to-play games and educational software to appeal to consumers outside the game industry's usual demographic of males in their teens and 20s.

Sony said it sold 710,000 PlayStation 3 consoles in the quarter -- compared with the 3.43 million Wii consoles that Nintendo said it sold in the same period.

On Wednesday, Nintendo reported a fivefold increase in its quarterly profit.

''It is looking harder and harder for Sony to catch up with Wii,'' said Masashi Morita, an analyst at Okasan Securities in Tokyo. ''Nintendo has grabbed the lead and shows no intention of letting go.''

Photo: The popularity of Sony's ''Spider-Man 3'' helped to offset the company's losses on the PlayStation 3. (Photograph by Columbia Pictures).